What does Selling, General & Administrative Expense (SG&A) mean?

SG&A are the costs that occur during the daily operations of a company. These are the expenses related to the selling, promoting and delivering of a product as well as managing the company. SG&A is not assigned to the cost of goods sold as it deals with all the other factors that come with creating a product.

  • Selling

Selling expenses can be broken down into direct and indirect costs associated with the selling of a product. Direct expenses only occur when the product is sold and include shipping supplies, delivery charges and sales commissions. Indirect expenses are the costs that occur throughout the manufacturing process and after the product is finished. An item does not have to be sold for an indirect expense to be incurred. This can be considered money spent to earn sales. Indirect expenses include product advertising and marketing, telephone bills, travel costs and the salaries of sales personnel.

  • General and Administrative Expenses

General and administrative (G&A) expenses are referred to as the overhead of the company. They are the costs a company must incur to open the doors each day. G&A costs are more fixed than selling costs because they include rent/mortgage on buildings, utilities and insurance. G&A costs also include salaries of all no sales personnel.

 

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